Explore BrainMass
Share

Explore BrainMass

    required return

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A company has a beta of 1.3. The risk free interest rate today is 8% and the return on a market portfolio of stocks is 14%. (Therefore the market risk is 6%, the difference the market return and the risk free return).

    I. What is the required return (equity cost) on the company's stock?
    II. If the risk free rate rises to 9%, what will the required rate of return on the company's stock?
    III. If the beta of this company were 0.8, what would the its required rate of return?

    © BrainMass Inc. brainmass.com October 9, 2019, 7:53 pm ad1c9bdddf
    https://brainmass.com/economics/risk-analysis/required-return-beta-132451

    Solution Preview

    A company has a beta of 1.3. The risk free interest rate today is 8% and the return on a market portfolio of stocks is 14%. (Therefore the market risk is 6%, ...

    Solution Summary

    The required return is encompassed. The difference the market return and the risk free return are examined.

    $2.19